SAC Capital Advisors LP, the hedge fund run by Guru
, will pay a record-breaking $616 million in order to correct
U.S. regulatory claims stating that two of its portfolio managers
were involved in illegal insider trading. The $616 million is set
to be paid, but that doesn't prohibit or necessarily mean that
the Securities and Exchange Commission (SEC) won't pursue Cohen,
himself, in the future. Cohen claims that he's done nothing
wrong, but he will be the one paying back the bulk of this fee.
was connected to the alleged illegal trades done by SAC Capital's
subsidiary company, CR Intrinsic Investors LLC, and its former
manager, Mathew Martoma, in November 2012. U.S. prosecutors have
described this as the "most-lucrative insider-trading scheme"
they've ever seen. The estimated profits and averted losses of
this case add up to $276 million.
What this means is that CR Intrinsic Investors, essentially made
$276 million on this insider trade. Fifty percent of that total
went to fees, 30% went to Steve Cohen and employees of the firm,
and 20% went to the investors. So SAC Capital made $221 million
and now they have to pay back $552 million (on their own, with no
help from the investors).
The SEC has initially charged a subsidiary of SAC Capital and its
former manager, Mathew Martoma, of an insider trading scheme
involving an Alzheimer's medicine being jointly developed by two
different pharmaceutical companies. According to the SEC, Martoma
illegally obtained confidential details about the clinical trial
surrounding the drug. Martoma discovered that the clinical trial
results turned up negative through Dr. Sidney Gilman, the
chairman of the safety monitoring committee overseeing the
clinical trial. Gilman has already agreed to pay over $234,000 in
disgorgement and pre-judgment interest.
Despite the evidence piling up against him, Martoma still claims
to have done nothing wrong. Martoma's lawyer, Charles Stillman,
claims, "SAC's business decision to settle with the SEC in no way
changes the fact that Mathew Martoma is an innocent man. We will
never give up our fight for his vindication."
Since investigating the firm, the government has found at least
eight current or former SAC employees linked to allegations of
insider trading while working for the hedge fund.
These record-breaking monetary sanctions against SAC Capital and
CR Intrinsic serve as a very serious warning that the SEC won't
just punish the individual guilty of illegal insider trading, but
also the entire hedge fund advisory firm and their funds
accountable when their employees break the law.
To watch a video explaining Martoma's insider trading case, click
For more information on guru
and his portfolio look at
Steven Cohen's latest trades
.About GuruFocus: GuruFocus.com tracks the stocks picks and
portfolio holdings of the world's best investors. This value
investing site offers stock screeners and valuation tools. And
publishes daily articles tracking the latest moves of the world's
best investors. GuruFocus also provides promising stock ideas in
3 monthly newsletters sent to